By Kevin Gibbons
You’re out with a group of friends at a bar or restaurant. Everyone is having a good time. Someone suggests ordering a bunch of appetizers and another round of drinks. Without even thinking, you pipe up “I’ll get this.” Or maybe you just keep quiet, don’t say anything but mentally add up your share of the growing bill. At the end of the evening, the group leader says “let’s keep the math simple and just split it evenly. The service was good. Don’t forget to kick in for the tip.” And just like that, your monthly entertainment budget is gone in one night. As everyone heads home, you hear the chorus of “Same time next week!”
This scenario sounds a bit dire and extreme, but many of us experience it on a fairly regular basis. Social spending can be one of the hardest areas to get under control. In this article, we’ll talk a little bit about why that is and offer some tips to make sure you remain in charge of your money.
The Social Experience
We like being to be with our friends and want to be liked by our friends. When we get together for fun interaction, no one wants to be the wet blanket that kills the energy. If alcohol is involved, there is certainly the opportunity for self-control to weaken and for us to spend more than we had planned. But even without alcohol, the feelings of camaraderie and goodwill when socializing with friends, the desire to “keep the party going,” can lead to overspending. When everyone is having a good time, no one wants to be the one to cause it to stop.
But in addition to these feel-good motivators, there is also some social pressure. Most of us have an innate sense of responsibility to pull our own weight when we are with our friends. We don’t want to be thought of as either cheapskates or freeloaders. The first makes us reluctant to call for spending restraint in social gatherings, while the second can push us to pay our fair share, even if that is beyond our spending plan for such activities. Finally, many of us have friends or acquaintances who have more money or different spending priorities and can subtly or overtly exert pressure on us to match their spending.
All of these situations and drivers can cause us to spend more than we can or want in social situations.
Who is Making the Decision?
Social spending should be a part of everyone’s spending plan. Relaxing and interacting with friends and family is a vital part of life. What we need to do is determine what amount of our money is appropriate and comfortable for us. Everyone has different goals and priorities. If you are saving for a house, a car or a wedding, you may want to funnel more of your disposable income towards those goals than going out every weekend. You should ask yourself, are you comfortable with delaying your house purchase by a year so you can continue going to that weekly dinner or club night? If you are, that’s fine. But the choice should be yours to make, not one you are pressured into by others.
Tips for Managing Social Spending
- Determine Your Spending
If you haven’t done so already, create a Spending Plan. Determine how much money you want to allocate towards social activities for each month. Set this money aside, either physically or conceptually, and stick to it. That is all the money you have for that purpose for the month. If you spend less than your set-aside one month, you have the option of carrying it over to the next month.
- Give yourself a physical reminder of what you are saving for.
If you are saving for a trip to Italy, write “Italy” on a Post-It Note and stick it in the front of your wallet. That way, every time you are considering spending, you will be reminded of what you decided was important to you.
- Let your friends know your situation and your priorities.
This can be very difficult. No one wants to appear as if they are struggling with money; but you don’t have to do that. Just let them know that you have certain priorities you are channeling your money towards, and that you have a fixed amount of money available for social spending. Most of our friends want to support us (that’s why they are our friends). If they don’t understand or can’t accept that you have different priorities, then, as painful as it may be, you may have to distance yourself from those people. You should set your priorities. You should not be bullied into them by others.
- Propose alternatives
If you can’t afford getting together for a full dinner, suggest coffee, drinks or dessert. If your friends want to go away for a week in Las Vegas, suggest a weekend somewhere closer. This has a clear benefit in showing them that you are still interested in spending time with them, just within your means. If they insist on the dinner, offer to meet up with the group later.
- Use Social Funds Transfers to Settle Bills
One of the more challenging aspects of social spending is dividing up the check at a restaurant or bar. Wait staff do not really like running 10 credit cards for a bill, and no one ever has exact change, so people end up over-paying or under-paying their share and “settling up later.” With social spending apps like PayPal and Venmo, one person can put the entire bill on their card and everyone else can immediately transfer the exact amounts. Everyone is paid up and done right at the event.
There are a lot of complicated dynamics and psychologies wrapped up in social spending, from individual feeling of responsibility and fairness, to the “provider mentality,” to subtle and overt social pressure from other members. The key idea to remember is that you should be the one deciding how you spend your money. If you explicitly set your long and short term priorities for yourself, then you will know not only how much money you have for these social situations, but why you have that much and no more. Be honest with your friends, not necessarily with the details, but with the broad idea that you have a limit because you have other purposes for your money. Be flexible with your options, but firm with your limits. Then you will enjoy your social activities without remorse because you know they are part of your Spending Plan.
Kevin Gibbons is a Cash Flow Planning Expert, the Vice President of The Savvy Life and co-author of the international bestseller Living The Savvy Life. For the past eight years, Kevin and Savvy Life Founder Melissa Tosetti have worked with over 545 individuals and families to create Spending Plans.
They also work with financial advisors and their clients doing cash flow planning as well as giving Savvy Living presentations via webinar and in-person to audiences across the U.S.
To learn more about how Kevin and Melissa work with clients, visit The Savvy Life’s Programs Page.
If you’d like to learn more about how they work with financial advisors and their clients visit: The Savvy Life Advisor’s Page